How did you decide on your trading strategy or method of trading?

Discussion in 'Strategy Development' started by Junky, Jan 17, 2018.

  1. After spending nearly 10 years on this subject the day came learned only one single logic that produces results.I think because i knew enough that in some strange way i was ready for it.This is what i think now,back then there was a lot of frustrations.

    And that's mainly because if everybody goes one way i go the other(not necessarily opposite).I understand short comings of this and I do like to fit in and "be one of the guys"( i learned from living in USA),but in solving problems i have this strong tendency to look at solution in unique ways.

    Yes ,around that i build trading method,but that wasn't easy by any means.
    Only because logic was solid i proceeded forward.
    First test did not look so great. I piled up signals and all of them were in a draw down and if i only rely on short term backtests i would not put any value to it and possibly throw it away.Only understanding that math behind was solid and logic was sound i started working on putting together a method.Basically it came from understanding that i if somebody told me better logic i still would come back to my own.In there was an answer to some difficult questions,it felt like it was mine and it was good.

    This is why i view that from backtesting alone it is very difficult to see something meaningful even if it was there.The believe in yourself has to be borderline crazy.Yes the results of the first test aren't great,but no,this will not shake me down.It was time to work on it

    There was no string them together,just building a method to the a single logic

    kind regards
     
    #31     Jan 20, 2018
    ironchef likes this.
  2. Welcome to ET!
    This is question that as traders we constantly deliberate with changing market conditions and changing life conditions.

    I see myself as a business owner and investor than a trader. However, trading is what a I do 7 hours a day, 252 days of the year. I manage two other businesses as a means of diversification, both from an income and mindset perspective. If I didn't have the other two businesses, trading would just burn me out.

    To answer your question, my path to trading was to become a long-term capital growth investor and short-term high-income trader. So after 20 months into trading (having known nothing at all about trading), I have aligned myself on a mix of short-term (2-3 days), medium-term (2-3 weeks), long-term (3-6 months) and very long-term (2-3 yrs) strategies using multiple instruments in options and commodity futures. The biggest influence on coming to this selection was reading Ray Dalio's blurb on investing in 15 to 20 non-correlated asset classes. Still not there yet, I probably get around 8 asset class diversification through my trading and my business endeavors and go after 20%+ alpha. There were more detailed books that I've used to develop each of these strategies.

    I chose options and long-term sector focused investing leveraging my skills in math and a certain industry and sector knowledge. There was an intellectual pursuit in this choice because even something as mechanical as trading, if not done with certain seeking of knowledge, I knew I would burn myself out.

    Hope to hear what decision you will come towards.
     
    #32     Jan 20, 2018
    Junky and fan27 like this.
  3. ironchef

    ironchef

    Thank you sir.

    As the world's best known quality guru, Prof Edward Deming used to say: There is no substitute for profound knowledge.
     
    #33     Jan 20, 2018
  4. I am no sir,not to you,not to anyone

    This is not exactly best subject to pursue,because the more one learns to more difficult it becomes.More perceived knowledge forces to ask more problematic questions and spend all free time to try come up with some answers.

    signed Joe six-pack :)
     
    #34     Jan 20, 2018
  5. Simples

    Simples

    I started with Rocket Science for Traders, cycle analysis and trying out all the usual stuff in Excel, like trendlines, triangles, RSI, converting numbers into signals, you name it. This was the magical thinking stage of trading, where math should turn into some kind of magical profitable system, but never really did.

    None of that effort made any sense until I had a system that could backtest my ideas, starting from simple logical ideas about price, trend, volatility, risk of capital, etc. That system got too complex, needy of proprietary solutions and services, so regretably had to shut it down. A requirement now is that the system need to be standalone, 100% fixable by myself, preferably possible to diversify across instruments, brokers, platforms, though not gone all the way there yet.

    My next and current system is really many experiments using Golang and creating own custom code. It does meet above requirement, and can backtest and automate trading using same rules and conditions. If something doesn't even backtest well (not stellar, that's probably just bugs), how on earth do you trade it profitably once crossing beyond magical thinking-stage? I got a live system I tried to make simple, but it doesn't perform well yet and might be due to magical formulas not working that well in future, but, it should work somewhat if markets "lift all boats" - have to be patient as well, not risking more than minimum. The system did scale well enough both down and up though, and each part tested pretty thoroughly. But might be too many parts to it still.

    Simple is better, though easy to hear, hard to accomplish, or maybe some just lucky early on.
     
    #35     Jan 21, 2018
    Van_der_Voort_4 and Junky like this.
  6. ironchef

    ironchef

    First, my apology.

    Second, I beg to disagree. Trading without understanding the fundamentals of how financial instruments are priced, how the market works is like flying blind. It is true many here gave me a hard time for asking too many "damn" questions but how can I understand without finding answers to my questions?

    And yes, I do spend lots of time, maybe too much time, contemplating questions about the fundamentals of options, charts... and about why someone is willing to take the other side of my trade.

    Regards,
     
    #36     Jan 22, 2018
  7. No apology is needed

    In Budapest there is a Statue of Anonymous.Think about him as taking other side of your options trades :)

    KK.jpg
     
    #37     Jan 22, 2018
    sle and Xela like this.
  8. Xela

    Xela


    He looks quite relaxed about them, too: not sure whether that's a good or a bad sign, for your own positions(?).
     
    #38     Jan 22, 2018
  9. AlexFas

    AlexFas

    #39     Jan 22, 2018
    Junky likes this.
  10. MattZ

    MattZ Sponsor

    When beginners ask which method they should choose what they really ask is what set of the right decision making would allow them to have a positive expectancy. What I propose is to work backward: Decide under what circumstances you should not take a trade or operate. For example, what type of volatility is not suitable for your risk tolerance and your capital. After you eliminate all the "NOs", you could focus on stuff that does work for you,
     
    #40     Jan 23, 2018
    Junky, tomorton and themickey like this.